Federalism, regulatory lags, and the political economy of energy production.

• Author: Spence, David B.
• Position: IV. Federalism and Fracking through Conclusion, with footnotes, p. 477-508

IV. FEDERALISM AND FRACKING

A careful examination of Table 4 reveals that the federal government regulates fracking, like other onshore oil and gas operations, relatively lightly. There is no federal licensing requirement for fracking operations and few other federal approvals are required as part of a fracking operation. Federal regulation may be triggered if the fracking operation risks harm to an endangered species, (216) will result in a discharge to surface waters (217) or a pretreatment facility, (218) or will result in underground injection of wastewater for disposal. (219) The transport of hazardous chemicals requires compliance with Hazardous Materials Transportation Act's labeling and manifest requirements. (220) However, it is not uncommon for fracking operations to avoid regulation under many of these provisions. (221) Critically, if the operation requires no federal approvals, then it will not trigger ancillary federal regulations, such as the requirement to obtain certification from the state under the CWA (222) or undertake an environmental review under the NEPA. (223)

On the other hand, fracking is subject to a growing and varied list of state regulatory requirements. (224) Given the ongoing controversy over the sufficiency of existing regulation, is there a case for comprehensive federal regulation of fracking operations? Turning once again to the rationales for federal regulation developed in Section III.A, we might ask how persuasively each rationale applies to the case of fracking, while keeping in mind the influence of politics in the regulatory process. The next section will explore those questions. (225)

1. Spillovers and the Geographic Scope of Fracking Externalities

   Do the environmental, health, and safety externalities of fracking tend to cross state lines? If so, that fact might suggest an increased role for federal regulation of fracking. There remains considerable uncertainty about fracking's environmental consequences. However, an examination of what we know about fracking's environmental impact suggests that much of that impact is local.

   1. Water Supply

      Fracking consumes enormous quantities of water, much of which remains in the ground after the completion of the fracking process. (226) Widespread fracking operations, then, pose the potential to strain water supplies in arid parts of the country. Traditionally, water supply issues (227) have been a matter of state concern. Federal regulatory jurisdiction over water has historically been confined to navigable surface-water bodies and associated wetlands. (228) For example, federal Commerce Clause jurisdiction under the CWA is tied to the navigability of affected surface waters, (229) and the Federal Power Act expressly reserved to the states the power to control water supply issues. (230) Indeed, most interstate conflict over the use or management of bodies of water on state boundaries has been resolved through voluntary compacts between the affected states, though those compacts are subject to ratification by Congress. (231) On the other hand, most water supply conflicts pit local uses or users against one another. Characteristic disagreements involve farmers seeking irrigation water and homeowners seeking drinking water or conflicts between communities using the same aquifer. These battles generally do not implicate national interests and rarely spill across state lines. Taken together, all of these considerations suggest that water supply issues should be treated as a state and local matter.

      On the other hand, many commentators predict that water supply issues will become more contentious in the future as growth and the effects of climate change strain water supplies, particularly in the Southwest. (232)

      Fights over water supplies could lead to increased incidence of interstate conflict, which could in turn trigger federal regulation as an adjudicatory response to conflict. Indeed, many of the regional compacts that exist today were the result of this kind of interstate water dispute (233) and some were specifically created to resolve cross-border conflict over the use and protection of the water resource. (234) Notably, the significance of water-supply issues for fracking varies greatly by region. For example, in the Eagle Ford and Barnett Shales of Texas, where drought is a problem, these issues may ultimately loom large. (235) In contrast, in the Marcellus Shale of New York, where water is more plentiful, water supply seems unlikely to constrain development. (236) Thus, while water-supply concerns may become a national issue, the threats to water supply posed by fracking vary considerably throughout the country.

   2. Neighborhood Character Issues

      Neighborhood character impacts are, by definition, local. Nevertheless, they are perhaps the most significant consequences of fracking. From the beginning of site preparation through the completion of the fracking job, (237) fracking is an industrial process. Like other such processes, it can affect the air quality, water quality, and visual aspects of the nearby environment. It may also result in noise, social disruption, and other consequences of industrialization. Following well completion, the production phase is much quieter, but the cumulative effects of fracking are profound and atypical, regardless of whether they take place in urban or rural settings. These impacts can pose difficult political problems for state and local governments. In rural areas, fracking has divided small towns, pitting longtime residents (seeking additional sources of income) against more recent arrivals (seeking a peaceful refuge from the city). It also can divide those who stand to earn production royalties against those who do not. (238) In urban and presumably wealthier areas, fracking can provoke opposition from better-funded and more-sophisticated NIMBY ("not in my backyard") groups. When fracking meets political resistance, elected local government leaders may respond with ordinances banning or restricting fracking. The City Council of Pittsburgh passed an ordinance banning fracking within the city limits in late 2010, (239) and other communities within the Marcellus Shale and beyond have taken similar actions. (240) Most local communities have zoning codes which specify where industrial uses may or may not take place. However, because towns, villages, and counties are political subdivisions of the state, state law may preempt local law just as federal law sometimes preempts state law. (241) On the other hand, some states have so-called "home rule" provisions which expressly reserve to local governments the power to regulate property use. (242)

      Despite New York's home-rule provision, the New York State Environmental Code expressly preempts local laws regulating oil and gas production (while permitting local control over roads and real property taxes). (243) In at least one case, a New York court invalidated a local zoning ordinance that imposed a bond requirement and permit fee on prospective natural gas producers, citing the statutory-preemption provision. (244) However, there is contrary precedent as well, (245) including a February 2012 New York State trial court decision upholding a local ban on fracturing in the town of Dryden, New York, under the state constitution's home-rule provision. (246) In Pennsylvania, the gradual migration of fracturing operations from rural to more urban settings has provoked legislation limiting the ability of local communities to control fracking operations through zoning laws. (247) By contrast, the New York legislature is now considering legislation that would expressly permit local communities to use zoning laws to limit or exclude fracking within their borders. (248) In Texas, some of the Barnett Shale communities use zoning laws to steer fracking and other gas production activities to areas zoned for industrial uses. (249)

      These stories indicate that states and local governments are continuing to grapple with the question of how (and how much) to regulate fracking based on its local impacts. As difficult as these issues are, they are issues of state and local concern. Ongoing battles over local ordinances, and over whether state regulatory requirements ought to preempt local requirements are understandable, and even appropriate. Local governments are political subdivisions of the state, and ultimately these issues will and should be resolved at the state level. (250)

   3. Fugitive Greenhouse Gas Emissions

      At least one of the impacts of fracking is not solely a local concern: the emission of methane from natural gas--gathering and--processing operations. Research into this issue is in its infancy, and there is a great deal of disagreement about the actual level of emissions. However, as noted previously, (251) some analysts contend that gas production operations release significant amounts of methane into the atmosphere. These emissions are not merely of local concern because methane is a potent greenhouse gas. Indeed, it is far more potent than carbon dioxide. (252) Methane emissions thus contribute to a problem that not only extends beyond state boundaries, but also beyond national boundaries. Even small amounts of methane can have significant climate-change impacts. (253) These effects can, if significant enough, cancel out any climate-change benefits associated with replacing coal combustion with natural gas combustion (for example, in electricity production). Indeed, concern about the effects of fugitive methane emissions from natural gas production has led some environmental groups to reverse their policies in support of natural gas as a bridge fuel to help the economy wean itself from fossil fuels. (254)

      How might federal regulation address methane emissions from fracking operations? Fugitive methane emissions are one focus of the ongoing EPA study of fracking. Assuming the agency concludes that fugitive methane emissions are a significant...